OLYMPIA – As conflict in the Middle East rattles global oil markets, driving gas prices higher, Washington lawmakers are racing to finalize a state budget while acknowledging that many economic forces shaping residents’ wallets remain beyond their control.
With the Legislature scheduled to adjourn Thursday, budget writers say they are crafting spending plans based on current forecasts — even as global instability threatens to push costs higher across the economy.
“We cannot account for every bit of chaos that is coming out of this (Trump) administration,” said House Appropriations Committee Chair Timm Ormsby, D-Spokane, on Tuesday.
Washington gas prices are among the highest nationwide for many factors, including state taxes, distribution and labor costs. The recent increases due to global market swings can quickly raise the cost of transportation, shipping and everyday goods, and further squeeze household budgets — which in turn can affect consumer spending and sales tax revenue, a key source of state funding.
In Washington, drivers are seeing even higher costs than usual, with the average price for a gallon of regular gas $4.69 Tuesday, up 16% from last month, according to fuel price data published by AAA.
“We’re seeing volatility within volatility,” State Treasurer Mike Pellicciotti said, pointing to supply chain disruptions that can ripple through the broader economy.
That affects more than just the price at the pump for folks, that's supply chain across the board," Pellicciotti said.
For lawmakers, the price spikes underscore the fragile backdrop of this year’s budget negotiations, which are unfolding amid debates over affordability, proposed tax changes, and whether efforts such as an income tax on high earners would deliver meaningful relief for residents.
Beyond global markets, lawmakers are also watching federal policy. The Trump administration has continually attempted to slash funding to Democratic-led states.
Gov. Bob Ferguson has warned since the start of the session that the roughly $2.3 billion budget shortfall puts the state in a difficult position. More than $15 billion in federal funding has been at risk since the start of 2025, with over $165 million in costs shifting to the state budget to cover some of the gaps, according to the governor's budget policy highlights.
Ormsby said lawmakers rely heavily on projections from the state’s Economic and Revenue Forecast Council, which provides the official outlook used to build the spending plan.
“That model has served us well,” Ormsby said. “We are all fatigued here — and the general public — on the chaos.”
The February forecast projects $1.8 billion more in revenue through 2029 than expected in November, driven by stronger-than-expected personal income growth, stable employment and higher taxable sales.
But concerns remain: persistent inflation, global uncertainty and federal policy shifts, such as tariffs, could slow growth. Economists say some indicators, including slower construction, reduced consumer activity and high borrowing costs could signal a mild economic slowdown or recession risk in the next year or two, though forecasts vary.
Attempting to model every possible economic shock, Ormsby said, would stall the budget process.
“We could do a Monte Carlo scenario, everything that could go wrong, and it would just be paralysis,” he said.
Instead, lawmakers say they are building the budget around current forecasts while setting aside reserves to cushion potential downturns.
Echoing Ferguson’s proposal, both chambers' budgets plan to tap the state’s Rainy Day Fund to help close the deficit. The Senate wants to withdraw about $750 million from the estimated $2 billion fund, while the House, like Ferguson, wants roughly $880 million. The House proposes replenishing the account in the 2027–29 budget using surplus funds from a pension account for law enforcement officers and firefighters.
Washington's reserve fund, one of the smallest in the nation relative to state revenues, is designed to stabilize the budget during economic downturns, and most lawmakers argue the current shortfall qualifies.
But Pellicciotti cautioned that relying on the Rainy Day Fund carries risks if lawmakers do not quickly replace the withdrawn money.
"I do think it's very important that the Legislature has a plan to replenish any money that they do take out," Pellicciotti said. "And that we continue to monitor very closely any impact (of) these economic conditions and the volatility associated with them.
Rep. Travis Couture, R-Allyn, the ranking member on the House Appropriations Committee, has voiced his opposition to using the fund, saying early in the session it would leave the “state exposed when the next downturn hits.” Republicans have been adamantly against using reserves to plug budget deficits, calling on majority Democrats to cut spending more than they plan to.
With the Senate expected to debate the budget Wednesday morning, lawmakers say economic conditions could shift quickly — from global oil markets to federal policy changes — even as they try to pass a balanced spending plan before the session ends.
Pellicciotti said the full fiscal impact of recent market volatility may not become clear until lawmakers finalize the budget later this week, acknowledging that global developments could shift the economic landscape after the plan is signed.
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